Data from the United States, europe and china as well. Alix no one cares right now because copper is at a twoyear high. There is going to be a lot of optimism, when you look at the weaker dollar and the s p. We will break that down and how the pandemic is now affecting Education Plus supply chains when we speak to dr. Nathaniel, the president of the hsc health care prism. Guy was mentioning it, the earnings season kicking off in earnest. Scarlet fu has more. We we are in this weird, normal world. Lets talk about pepsicos Second Quarter numbers. There are no live sports and no concerts. Limited restaurant service. There is a big dropoff in beverage sales. On the other hand, consumers stocked up their pain should pantries with breakfast foods. Let lead to a spike in the Quaker Food Division for the rest of the world was mixed. Anic sales fell only 300 the stock is higher. It is now at a three month high. The lack of guidance is a familiar theme. One third of companies the number of Companies ProvidingSecond Quarter forecasts is at a record low. Less than half the 10 year average. I like how gina put it, she calls it a continued information deficit. The information we are getting is sobering. Offs fargo will kick it tomorrow. The future will be worse in the Second Quarter than the first. Trading for these vendors. J. P. Morgan leading the way with a 50 increase in equity trading. Underwriting fees because they are managing more debt sales and equity sales. Top of mind is the reserving. Banks are trying to get ahead of loans that will not ever be repaid. According to barclays, provisions for losses will reach the highest since the financial crisis. Also the stream by the federal reserve. Mike male of wells fargo calls this clearly an income recession, not a balance recession because banks are capitalized. It is that they are not able to increase their dividends because of a drop in earnings. Wells fargo will be hardhit. Of the names that we will be reporting, we know they are getting ready for thousands of cuts job cuts later this year and it will likely cut its dividend. When it reports, they will have to set aside 4 billion for loan loss provisions. Alix good to see you. Thank you very much. Haley, i feel like the question that sets it up perfectly is our financial stocks priced for too much pessimism or is tech euphoria too big, what do you think . I dont think so. There is a huge hurdle to come here at the end of july and into the fall, as we figure out whether there is going to be more fiscal support for the economy. Whether we get a vaccine. Whether Consumer Behavior ey. It is because there are just a lot of questions about what is going to happen to loanloss reserves and the like. On the tech side, what i am really interested in here isnt the teslas and the stuff where multiples are just going insane. It is the stuff where there is a real story behind why they have resides revised. Ify andike shop zoom. These will have to Companies Want to put up or shut up. It is not just inflation trade or the income of said balance sheet. These are companies where there are longterm bets that were made in march and april about how big these companies were going to be. They are going to have to really put up the numbers this quarter. Dont, howy polarized is the market going to be . You take ee a little lower, i am wondering how the market is going to accept that. Here is the macro set up. We traded 22 times forward s p numbers s p. Does notized data set have quarterly s p 500 earnings equips think the height eclipsing the height before the pandemic before two or three of 2021. It was historically very high. The way i look at this is basically it would surprise me if we did not trade back down to 19 times at some point, which is 15 below. I dont see where the upside is on the earning over the next couple of quarters to really get the ee up considerably. We have seen markets fall out over the last couple of months. There is a reason, the consolidated tech names that have Pricing Power and basically winner take all status continue to drive the market higher. Everything else underneath has basically given up. It has not fallen apart yet. I think the market is waiting for what happens in late july and upcoming potential fiscal stimulus or not. It is on shaky ground. Fors going to be very hard that to keep going. We are at historically we are talking a 70 to 80 year historical level in the split between growth and values. That is not tenable for too long. Alix we like your cats. They are cute in the background. On the flipside, you might say ok, we have energy, health care and consumer staples. You have financial. Based on what you said, you want to buy them. What does the earning have to look like to justify buying them right now . Again, i dont think it is about the earnings this quarter. Are looking at 1. 5 years from now. I think the broader question is what makes that value trade go . It has not gone in several years. In some of these shortterm rotations, at times. The road to tech gains were so stretched they had to pull back to get that rotation. In order for me to get really psyched about that trade with financial and some of the you would need to see a massive fiscal stimulus Consumer Behavior return to Something Like normal. And he would need to see some expectation, like a real expectation of Interest Rates going up again. Right now, while the longterm Inflation Expectations are rising, yields are plummeting. There is very mixed messages. Until those two things end up heading in the same direction, i dont see why you change that trade. I would not be overly bullish on the tech trade anymore. Very similar to the discussion we had in early march, when things were similarly stretched and we saw it fall apart. Make an accurate assessment of what happens next, given the fact that 40 of S P Companies have withdrawn guidance. We will get earnings, they are all rearview mirror. What i want to know is what will happen next. How do i price the market in that environment . I think you are going to see realize the ball. I think in, youm interested kind of highlighted it. There is a model that i saw a couple of days ago that looks back at the last couple of months and it looks at the performance of names which have withdrawn guidance versus the names that didnt. The names that have withdrawn guidance were sick and the underperforming. A lot of those names are not going to be intact. Which is the only thing working right now. Going forward, even within tech, i am a little scared about what is going to happen when google says nothing. I think they are going to have a harder problem than facebook, in terms of retriggering the demands for those ads. Google is more reliant on small businesses, versus facebook, where the advent inventory is taken up immediately by things that were previously higher cost and now are lower cost. Vol, i would just be buying. Guy we are going to wrap things up. Thank you very much, indeed. We will stay with the tech thing. Chipmakers we will have more on that story next. This is bloomberg. The coronavirus is states that already be it in the early days. That tests are revealing more cases. Hospitalizations are rising and in some cases, so our depths. People are convinced the virus wont seriously hurt them. Hong kong is taking new steps to keep the coronavirus from spreading. Ands shutting down all gyms game arcades for the next several days. Public gatherings will be limited to no more than four people. All travelers were have to past a test. Will have to pass a test. Several other u. S. Officials were named. The move is largely symbolic. Last week, the u. S. Sanctioned a top member of chinas Ruling Communist Party and three other officials over human rights abuses. Washingtons team will no longer be known as the redskins. They are dropping the name after coming under pressure from sponsors and retailers. Aresnyder and ron rivera working to come up with a new name and logo. It is a big reversal for snyder, who said in the past the name would never change. The timing of this suggests the Current Power of the debate over racism. Global news 24 hours a day, on the air, on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Guy thank you very much. News announced earlier on, Analog Devices has agreed to buy for 21 Million Dollars by maxim for 21 billion. Lets talk about why this deal makes sense. Demandsan area that multiple margins. 65 plus. Can they get enough out of this deal to justify what is being done and get those margins even higher . Sure. The deal makes sense. If you think about why analog might be acquiring maxim, it is a deal about scale, trying to further leverage their scale and compete with one of the larger competitors at texas instruments. The profile for maxim, their 700ating margins are about basis points smaller than Analog Devices. He could shift some of maxims capacity into Analog Devices. That can improve the margins over the longterm. If you look at the scale benefits, there is a margins benefit to it as well. That should start reviewing itself over the next three to five years. Alix a big part of this is to compete with texas instruments. The fed view analog against ti right now . If you think about the analog sector, ti is the 300 pound gorilla. That being said, it is the farm number two vendor. If youre looking for an alternative, Analog Devices should be there. The chinese caused problems in the past with such deals, do you think we will see issues around this one . They are hoping for a mid2020 deal close. Will the Current Administration stay . I think that plays a role. Will there be a new administration. Betweentical climate the two countries is still he did. I would not be surprised if there is a delay in the he ated. I would not be surprised if there was a delay in the deal. Ofx do we see that type premium, also . If we look at multiples, they are elevated because they are looking at it from a 2021 perspective. Investors may be thinking estimates are too low. The estimates may not have caught up to the potential going into 2021. That being said, Analog Devices has not been shy about making higher multiple deals. If you look at the linear paidology in 2015, they for that deal as well. Margin and at the longterm possibilities, the deal would make sense. Alix i appreciate the insight. Thank you very much. Ing up, the top coming this party member, what that means in relation to trade, coming up next. This is bloomberg. Bloombergime for the business flash. A look at some of the busiest biggest business stories. Google has announced a 10 billion fund to help speed up the digital economy. Investments will include Affordable Access and that is according to marcello. He told the Financial Times that we work will be profitable with an incredible diversity two years from now. A 9. 5 billion rescue by something. Another group struggling. No word on the sale. Mcclatchy includes places in charlotte, sacramento and fort worth. That is your Bloomberg Business flash. Alix china announcing sanctions against u. S. Officials, including marco rubio and ted cruz. Three other officials, over alleged human rights abuses. Do these sanctions have actual teeth to them or is this titfortat and nominal . A to me, this looks like moderate response from china. Do they impose sanctions on chinese officials which likely wont have impact because they dont have access to yes or will not travel to the u. S. Is this going to happen have a Material Impact . I think the answer is probably no. This looks more symbolic. Still, it is a reminder that tensions continue to escalate. There are a number of trouble spots as we head toward the president ial election in november. Is the expectation in beijing that things are not going to work between china and the United States . If so, what preparations are the chinese authorities making that will have a meaningful impact on financial departments . Historically, china has benefited from a very friendly global environment. 2001, they allowed china into the world trade organization. That has been hugely positive as a driver of chinas development. What has happened in the last two or three years, since the trump presidency, is a decisive shift in the mood. Causedthe trade war tensions with hong kong. Tensions with huawei. I think the realization is that they are looking at a more hostile world. Not just more hostile in relation to the u. S. , but also greater caution from europe. Greater caution from australia and elsewhere. I think what that is going to drive is a selfreliance strategy in china. They are going to be looking less to the global markets. They are going to try to do more at home. Is thehat i find amusing markets have lost their reaction function. On friday, we heard President Trump say a second part of the trade deal is off the table. They completely ignore it. Why . I think the market is focused on things which have an immediate, shortterm impact. The hong kong dollar peg. If something happens there, that would be a big deal. More tariffs. That would have an impact on corporate earnings. That is a negative for the market. What we have now is really a kind of slow burn deterioration in relations. Which willething affect chinas five year 10 year growth trajectory. It will mean weaker productivity over time, as they bring in technology more slowly. That is something which the market tends to pay less attention to. It is also harder to price in on a daytoday basis. If we get tariffs, something from the hong kong dollar peg, i think we will get a reaction. If it is just these titfortat areas, ss these guy thank you very much, indeed. Bloomberg economics chief economist. Coming up, we have plenty more market coverage. We will also be monitoring what is happening with the virus. Those conversations continuing. This is bloomberg. From london, i am guy johnson. This is bloomberg markets. Lets talk about what is happening with schools. Is pushing to get kids back in classrooms, suggesting it is not dangerous. Kevin cirilli spoke with marylands governor, larry hogan, about how his state is planning for the Upcoming School year. Everybody wants to get kids back to school because it is so important that we get them back learning again. We have to do it in a safe way. We are working carefully with our state superintendent and local School Boards and getting input from our Public Health doctors and our scientists, along with our teachers and parents. We will come up with a plan that will be some kind of a hybrid that makes sure we get our kids educated and backtoschool but in a safe way. Hogan, the republican governor of maryland, speaking with Kevin Cirilli earlier. Safelye on how we can bring kids back to school, we are talking to nathaniel beers. Joining us now. Thank you very much for your time. Very clearly there is clearly a debate about whether kids can be brought back safely and how we do it. What is your assessment of where we are on whether or not we can deliver the promise of giving kids the opportunity to come back but doing it in a safe way . Nathaniel the challenge we face in the United States is that there is a huge variation as to what the Disease Burden is in local areas. What the American Academy of staterics is encouraging and local School Districts to do is to think locally and think about how they can bring as many children as possible back for in person learning, as much as possible. As Governor Hogan noted, there will be some variability that will exist. The key is to keep children safe, as well as teachers and staff of schools as well. Alix dr. , part of the conversation is it doesnt kids that much. It has been older people. Hasou take a look at what happened the last few months, we cant see that. Do we know if that is true . Schools lock down everything locked down in schools were shut. We know how this virus affects kids . Nathaniel we are learning more and more everyday. I would call myself a skeptic, early, in that i encourage many local School Districts in the d. C. Area to contemplate closure so we could get a better sense of what is going on. From data inow the u. S. And other countries, particularly countries that have reopened schools is that we continue to see low Disease Burden in kids, as well as evidence that suggests kids are less likely to spread the virus. And less likely to have complications from the virus. That being said, if you have a teacher workforce that is largely over the age of 60, that is going to make a very different decision for you in a School District, then if you if youyounger than have a younger workforce that might be less susceptible to the virus as well. Guy this will sound like a strange question. What can we learn from what is happening in bars and restaurants, in places like florida or texas, that we can apply to schooling . Clearly there is an issue in those places because of people going inside. They are therefore turning into areas where people are contracting the virus and spreading it. There are some similarities. Both require people to be inside. I am wondering what we can learn and what we can do to assist ourselves in bringing the kids back. Nathaniel there are three big things for us to be focusing on. The first is ensuring physical distancing is adhered to as much as possible. Recognizing kids will be kids and we should not be fighting with them all day long. The cdc has put out guidance, saying that that should be six feet, when feasible. There is evidence that came out on june 1 that suggests that three feet might be as good as the 60, based on evidence. Basedularly six feet, on evidence, particularly if masking is involved. Studentsparticular and as ageappropriate should be wearing face coverings to ensure they are reducing the spread. Piece that we need to make sure we attend to is making sure we are dealing with the environment. Means increasing and improving ventilation as much as possible, keeping doors and windows open as much as possible. Doing as much outdoors as much as possible. As well as making sure the environment is being appropriately cleaned. These are things that will help us return to school in a substantive way. Cases areida covid we have. 7 yesterday, seen the most deaths in florida as well, recently. Lets take this as a good example. We had new york, that got hit hard in the beginning. They seem to be able to reopen because they locked down so hard, versus florida or california or arizona. Are we going to see a super regional, localized approach . How do you square that with guidelines from the cdc and the department of education, as well as the white house. . Nathaniel i think we absolutely need to see a regional approach. Opening up school in an area havingppening Rapid Community spread would put everybody at risk. Of the country, communities where there is very little spread. We should encourage those School Districts to really think about ensuring that kids can get all not just thees and education services, by reopening in person. That is going to require an investment of resources. Thinking about the equipment that teachers need to be safe, thinking about cleaning supplies, all of those require investments in our School District, that have already been hit pretty hard due to loss of local funding in many situations. Picking up on that point a bit, how much more is all of this going to cost . It is x plus what . To any percent . 30 20 . 30 . . Hat can we learn do we have an idea of how much this is all going to cost . Nathaniel there are some estimates. I am not an expert in that area. I would say that the association of the state superintendents and School Superintendents have put out some early estimates as to what they think it would cost at the local district level. The levels have been an additional 2 million per School District. That would be different, depending on the size of the School District. An urban School District like new york or d. C. Or miamidade are going to experience a much larger impact. Oft is based on an average eight schools in a School District. Certainly School Districts will have more than eight schools and they will have substantively more costs. That has to be part of the conversation about how do we federal and the state and local level, to ensure that there is a reasonable chance that you could safely reopen schools . Alix we are talking about budget cuts. Thank you for your perspective. Beers. S nathaniel bi coming up, signs of another showdown loom. This is bloomberg. Checking on the bloomberg first word news. If you are black in america, the coronavirus is more likely to kill you. The disparity has become worse as cases have surged across the u. S. In counties where the majority residents are black, the death rate has climbed to 3. 5 times the national average. That is up from three times, several months ago. In places of more than 100 deaths, black people have made up 20 as 3 of them. 23 of them. About 64 have filed and are cooperating in support. A new poll shows joe biden with a fivepoint lead in texas. Holds a 46 to 41 percent lead among registered voters. Say theye polls disapproved of trumps performance. In the u. K. , Boris Johnsons government will launch a for the endprepare of the brexit transition period. Authorities are sending 890 million. Global news 24 hours a day, on the air, on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Viruswith the surge in cases in florida, it is posing a threat of potentially triggering another shutdown. Consumers are back to stocking up like they did in march. Joining us now is craig fuller. Always good to chat. I feel like there are a couple of storylines. One is that the virus will come back to new york soon. The other is that there are potential regional shutdowns in florida, arizona, texas and california. You are the front man in some ways, what do you see . Craig i appreciate that. Great to be back on. 2020 has been a very interesting year for the broader economy, for freight. We are seeing unusually high volume for this time of year. 2018 was a record freight year in the domestic market. 20 20 is exceeding that, even right now. Typically, july 4 is a really. Uly is a slow month consumers are doing things other than buying hard goods. We are seeing freight accelerate in the month of july. This data is unusual for this time of year. Issuggests that the recovery actually much stronger than some of the broader economics suggests. People shipping . Can you give us a regional breakdown . A lot of are seeing volume on household improvement goods. Things like Floor Covering and carpets. We talk about trampolines and boats. Anything that involves consumers doing stuff around their homes, improving their houses, gardening equipment, all the way to activities that could keep them outdoors. Those are things that are really strong. We are also seeing a level of refridgerated or temperature control trade. That is what we saw in march when there was an acceleration in freight demand related to stocking up. We are starting to see that come back a little bit. Not to the degree it would suggest that consumers are panicked about the covid shutdown that could be imminent in parts of the country. We are seeing some level of demand but the dry volumes, ones that are not related to stock, are doing better than their refridgerated counterparts. Who dontthose of you know, guy johnson apparently has a trampoline. There is no video of him jumping but he did do that one time. That is how we got to that story. Is do we know where shipping expecting a recovery or a stock up . What are we buying here in the northeast that the sunbelt is not . Craig recovery, i think this is a recovery story more than a stock up story. We are not seeing the freight demand. The way we look at this is short hall. Estate interregional movements in the tristate area or the local area. We are not seeing high, accelerated demands in those areas. A cross continent, intercontinental moves that are much stronger and have recovered much faster than even the shorthaul moves. When we looked at the march data, we saw a lot of temperature control, ridge refridgerated goods that are moving shorthauls and took the breath of the demand curve. To, we are not seeing that that degree. We are seeing cross continental moves or u. S. Moves, suggesting that the freight recovery we are seeing is much broader than just a stock up story. Certain parts of the country, which have a much more aggressive stance on shutdowns, places like california and new york, where the government does enforce these rules, certainly consumers react to that. We believe that consumers never stop stocking up. That they always made some inventory of groceries and consumer packaged goods in their home, which means we wont see acceleration. Softeras we are seeing is some of the energy sectors. It is softer than the broader freight market. Showing upy is not in the freight data. Sense. At kind of makes would you go as far as to say this is a vshaped recovery . Craig i would. As it relates to freight demand. Keep in mind, 4 of our economy has nothing to do with freight. Health care, services and education. It does not drive the freight market. Stuff that does drive the freight market are hard goods. Anything related to consumers, what they are doing in their homes and remodeling their homes, we will see that in the data. Any clothing or hard goods consumers buy, as well as corporate spending in terms of commercial activities or industrial activitys. Those things drive freight. That that part of the demand curve has an aggressive vshaped. It is not just a vshaped, but an aggressive one. Accidentally higher than what it was in 2018, which was the exponentially higher than what it was in 2018, which was the previous record. Consumers for the industrial sector is doing much better than what the Economic Data would suggest. So, we are pretty bullish on the state of the freight market. Alix what are your clients saying in terms of Business Operations . Do they have enough workers to deal with underlying demand . Do they have to hire or pay more . Are they making up for the lost money that they might not have gotten earlier . What are you hearing . Craig trucking is a market where there are hundreds of thousands of events. Most of these companies are relatively small. Trucking, a lot of the midsized carriers, there are few big trucking companies. Most of them are either really up to 100 million businesses. We dont have a lot of huge corporations that you see in other sectors. Ppp,we saw is that the government stimulus money provided a lot of backstop to the industry. The industry was economically suffering from a couple of years of sluggish conditions. We have seen the stimulus money come in and basically prop up a lot of the areas that may have been struggling. We kept a lot of the capacity alive. What we have seen is now volumes are such that there is more volume than there is capacity. We are seeing rates go up, which is healthy for the freight market. We are seeing what i would consider a bullish return to trucking demand that is unlike anything we have seen in the past. As it relates to jobs, trucking is always reacting to job shortages and driver shortages in the market and basically an imbalance between driver availability and the amount of in the market. Carriers are short on drivers. Consumers are folks that drive trucks are looking at it and saying i am not working in food service. I am not able to work in some of the parts of the economy i used to be able to work. And my Unemployment Benefits are going to be drying up in the next early days. I need to be looking for other types of work. Trucking is always a great place between jobs. We are seeing a lot of new entrances to the market. It does not suggest that there has been an oversupply of drivers. The folks that would enter the market would artificially create capacity and hold down rates. We are not seeing any suggestions. Which is really bullish for the freight markets. Just very briefly, how much visibility do you have . How much visibility do you have going into the fold . Do you have an idea, particularly in some of the northern states, what people are anticipating at that point . Within 24 data is hours. We see what we would argue is the most realtime view of the freight market. We see it within 24 hours. And we see a large representation of the markets. Our data, freight and trucking data tends to leave the broader economy. It is anywhere from three to six point lead. They weup before see it show up on the consumer side of things. Because we have realtime data, we are looking at it and saying the Economic Data, which seems to lag, is suggesting the over economy overall economy is in worse shape than what we see in our data. As long as the stimulus dollars continued to flow for the economy or consumers can find proper work in the economy, they will continue to buy. I am personally bullish. I have no concerns about a slowdown in the overall economy. Guy you sound amazingly bullish. Craig fuller of freight weight. Thank you very much. This is bloomberg. We havewo big things for you this week, lets not forget about europe. There are significant meetings coming down in europe, particularly with the ecb meeting and the fate of the 750 billion dollar recovery fund. I think the ecb will park it for the time being and wait to see what happens with the economy. The meeting will be important. I think we may not get a deal but we may still get progress. That is probably going to be enough to keep the market on board. Alix as you compare it to the u. S. , where we are stalling out on the next round of fiscal stimulus, there is a narrative of money flowing out of the u. S. And into europe. It could be a different story. We will break that down within the next hour. Coming up, we will speak to the macro hive ceo and founder. Are equities still around the high of this session . This is bloomberg. Live from new york, i am alix steel. I johnson is in london. We are counting down to the european close. I have a prompter, i have a clock. That is exactly what i am feeling like with the markets. It is more pronounced over in europe. Tomorrow,ry about when that enthusiasm, that initial my world has changed feeling starts to unwind. I worry that could happen in the markets. The earningshere season starts. I think it is going to get really interesting. We will talk more in a few minutes time. Stocks that are really driving high. Take a look at tesla. We are north of 80 over the last 10 days. The s p is up by 1. 24